Small lump sums explained

In addition to common pension withdrawals, there are several other lump sums available from registered pension schemes. These include small pot payments, trivial commutation lump sums and winding up lump sums. As part of our Bitesize Technical series, Senior Technical Consultant, Joshua Croft explains small lump sum payments.

Key insights on small lump sums

Small pot payments

Small pot payments allow individuals to take smaller pensions as a one-off lump sum.

The individual must meet the normal minimum retirement age (or ill-health / protected age), the payment must not exceed £10,000, and it must extinguish entitlement to benefits under the arrangement.

A maximum of three small pots can be taken from non-occupational schemes, with no limit on unconnected occupational schemes.

These payments are not tested against the lump sum allowance or the lump sum death benefit allowance and do not trigger the money purchase annual allowance.

Trivial Commutation Lump Sums

Trivial Commutation Lump Sums are available only from defined benefit (DB) pensions.

The individual must meet the same age requirements as small pots, the lump sum must extinguish entitlement to DB benefits, and the total pension value must not exceed £30,000.

Winding Up Lump Sums

Winding Up Lump Sums are paid when an occupational pension scheme is winding up to commute low-value benefits.

No minimum age requirement, but the total value of benefits must not exceed £18,000.

More Bitesize Technical

Take a bite out of 'Ill health pension benefits explained', the previous instalment of our pension benefits Bitesize Technical series, or start from the beginning, here.